Business Essentials for Professionals


Low Pricing Strategy Employed By Chinese Retailer JD.Com Helps Sales Surpass Projections

Low Pricing Strategy Employed By Chinese Retailer JD.Com Helps Sales Surpass Projections
Price reductions and discount coupons helped Chinese online retailer raise sales after being negatively impacted by wary customers, as the company announced first-quarter revenue that above market projections.
In order to maintain their e-commerce market share in the second-largest economy in the world, and its longstanding competitor Alibaba Group have been lowering costs and providing discounts. Customers are drawn to these low-cost, discount-focused platforms.
According to Sandy Xu, CEO of, some of the standout categories for the company's retail platform include fashion, electronics and home products, especially mobile phones, and general items.
"As our improved price competitiveness increasingly resonates with users, the growth of our user base in lower tier cities accelerated in Q1, overtaking growth in higher tier cities," Xu said in a post earnings call with analysts.
Alibaba topped revenue projections on Tuesday, but its quarterly profit fell by 86%, mostly as a result of changes in stock investment price.
Compared to the 257.72 billion yuan average of 21 analyst projections published by LSEG,'s non-GAAP net profit increased 3.4% to 8.9 billion yuan ($1.23 billion) and sales increased 7% to 260 billion yuan in the January-March period. Analysts predict that sales will increase 6.7% overall.
In the previous year,'s net income attributable to shareholders was 6.26 billion yuan, but this year it increased to 7.13 billion yuan, or about 14%.
Analysts had expressed concern about the impact of the low-cost approach on margins and profitability prior to this week's results; however, CFO Ian Shan allayed those concerns on the analyst call.
He stated that growing users and profitability together "isn't contradictory" from the perspective of the organisation.
"We believe by constantly dedicating resources to product, price and service, this improves user experience, which drives up GMV (gross merchandising volume) and market share," Shan stated. "This forms a virtuous cycle in business enhancement and profit growth."
In March, announced that it would not be purchasing Currys' warehouse and store network, a move that would have allowed the British electronics retailer to grow into the UK and Europe.
Its foreign development has been less aggressive than that of its Chinese counterparts, but given that market observers anticipate slower domestic growth, it could be forced to look for new abroad revenue streams.

Christopher J. Mitchell

Markets | Companies | M&A | Innovation | People | Management | Lifestyle | World | Misc